Northern Gas Pipelines History
- 9-19-20 51st Anniversary of the great, 1969 Prudhoe Bay Lease Sale
- 12-14-18 A Citizen’s View Of The Two Alaska Gasline-LNG Projects, Dave Harbour
- 9-19-16. AUDIO: “Pipeline Promises”. Rashah McChesney, Alaska’s Energy Desk – Anchorage, reviews some of Alaska’s gas pipeline history with Bill White, respected journalist and former employee of the Alaska Gas Pipeline’s Federal Coordinator Office in Washington, D.C.. For more than forty years, the state has tried — and failed — to bring natural gas from Alaska’s North Slope to market. In all, there have been at least ten different versions of the pipeline mega project. And not one has come close to breaking ground. This week, in the series Pipeline Promises, Alaska’s Energy Desk is taking a step back to ask some key questions: Will it ever happen? And, if so — why is it taking so long?
- 2015 update of Alaska gas projects, thanks to Herb Butler and the Fairbanks News Miner.
- 2014 Alaska Department of Revenue History of the Volatile Severance/Production Tax Changes.
- 2014 Wikipedia history (Inaccurate. We are in the process of providing Wikipedia with corrections. -ed)
- 2012 Denali project review.
- 2012 Arctic Gas history by Larry Persily, Federal Coordinator, Arliss Link. Our .pdf,
- 2011 Congressional Research Service, Paul W. Parfomak, Specialist in Energy and Infrastructure Policy (Mostly accurate but omits reference to early, post-1969 Lease Sale gasline efforts, including Arctic Gas’ $250 million environmental/engineering
- 2008 Governor Sara Palin’s gas pipeline role, US News, Kent Garber.
- Up Here Magazine, History of the Alaska Highway gas pipeline and other projects, by Dave Harbour. (.pdf of original draft)
- Far North Oil and Gas Review, 2002 status of Gas Pipeline Projects, Dave Harbour
- Don’t Forget the Mackenzie Dellta, by Dave Harbour
- Up Here, Review of Congressional and participant gas pipeline actions.
- Alaska Oil & Gas Reporter: Northern Gas Pipelines Becomes Clearing House
- Tim Bradner’s Review Of Northern Gas Pipelines.
- Betty Galbraith’s Chronology of Gas Pipeline Events
- CBC Arctic Gas Pipeline Digital Archives
- Bill White for Office of the Federal Alaska Gas Pipeline Coordinator:
- 1971-1982: The Alaska Gas Pipeline Wars. (Copy below)
- 1982-2001: The Yukon Pacific Era (Copy below)
- 2001-2012: Interest in Alaska Gas Revives (Copy below)
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March 15, 2012
And a race was on to pipe Alaska gas south to the rescue.
NEW ENERGY FOR A GAS PIPELINE
For utilities and other buyers, their affection for natural gas flip, flopped, then flipped again during the span of years starting in about 1999. It became the fuel of choice, then the fuel of risk, then back to the fuel of choice again.
Internally, the three companies were not fully aligned on the project. ExxonMobil was pushing a route that was about to ring alarm bells within Alaska, the national environmental community and even Congress.
OVER THE TOP
Besides ExxonMobil’s Alaska North Slope holdings, its Imperial Oil subsidiary had smaller gas discoveries in the Mackenzie Delta across the Canadian border.
Alaska gas pipeline 1998-2012 |
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1998 – Alaska enacts Stranded Gas Development Act to let an LNG project sponsor negotiate state fiscal terms on natural gas development. Law lapses in 2001 after no one applies. |
April 2000 – ExxonMobil, BP and Phillips – the major North Slope producers – announce they will rejigger their interests in Prudhoe Bay so that each company’s share of oil production matches its share of gas production. This alignment eases cooperation on a gas project. |
2000 – As U.S. natural gas prices rise over gas-shortage worries, ExxonMobil, BP and Phillips announce in December a joint effort to evaluate gas development, from cost to potential pipeline routes. They spend $125 million over the next two years. |
2000-2001 – Severe winter causes Lower 48 natural gas prices to briefly spike above $10 per million Btu. |
2002 – Alaska voters approve creating Alaska Natural Gas Development Authority, a state agency charged with obtaining North Slope gas for an LNG project. Agency languishes, however. |
2003 – Alaska enacts Stranded Gas Development Act to let any gas pipeline sponsor negotiate state fiscal terms, not just an LNG sponsor as in the 1998 law. |
2004 – State receives separate applications under the SGDA from pipeline companies, natural gas producers and others. |
October 2004 – Congress enacts the Alaska Natural Gas Pipeline Act, which streamlines federal permitting for a project, limits lawsuits and authorizes $18 billion in loan guarantees, adjusted for inflation, for gas delivery to Lower 48. |
2004-2006 – Gov. Frank Murkowski negotiates contract with ExxonMobil, BP and ConocoPhillips under the SGDA. Terms include state ownership share of project, gas taxes locked in for 35 years, and significantly higher oil taxes but no more changes for 30 years. |
2006 – Public pans proposed Murkowski contract. Legislature never votes on it but does raise oil taxes. Murkowski loses re-election bid. |
2007 – Alaska enacts Gov. Sarah Palin’s Alaska Gasline Inducement Act over protests of the big three North Slope producers. Law authorizes up to $500 million in pre-construction subsidies to a proposed project that meets certain state conditions. |
2008 – State awards AGIA license to TransCanada. BP and ConocoPhillips say they will look at building a non-AGIA sanctioned pipeline to Canada. |
2009 – TransCanada gets a partner: ExxonMobil, the largest holder of North Slope gas reserves. |
2010 –TransCanada/ExxonMobil and BP/ConocoPhillips separately hold open seasons soliciting customers for their proposed pipelines. |
2011 – The BP/ConocoPhillips project disbands, citing “lack of customer support.” The companies spent $165 million. |
Early 2012 – Lower 48 natural gas prices sink to 1990s levels amid shale-gas boom. TransCanada/ExxonMobil has signed no customers from its open season but, as required by AGIA, continues to work toward applying to Federal Energy Regulatory Commission for a construction and operation certificate on a line to Canada. FERC in early stages of environmental impact statement. |
The Alaska Legislature followed in 2001 with a law that prohibited granting state rights of way for an over-the-top route. Some in Congress also began discussing a ban on the route.
PIPELINE PLANS RETREAT
In mid-2001, natural gas prices were in a trough, a temporary one as it turned out.
Soon, companies and others with gas pipeline ideas lined up to talk terms with the state.
STATE NEGOTIATING TEAM FRACTURES
- A pipeline-company project. TransCanada and Foothills Pipe Lines, two Canadian pipeline companies holding rights to the Alaska Highway project and route sanctioned in 1977, blew the dust off of their plans. TransCanada wanted the state to buy gas from the North Slope producers and market it. Later that idea morphed into both TransCanada and the state buying and marketing the gas.
- An LNG project. A trio of Alaska local governments – the Fairbanks North Star Borough, the city of Valdez and the North Slope Borough – formed the Alaska Gasline Port Authority in the late 1990s. Their proposal mutated over the years, but early on they proposed a pipeline and LNG plant at Valdez financed via low-interest debt the authority would issue. Low-cost debt would help the project economics. The LNG could go to Asia or the West Coast, wherever buyers could be found.
- A producer-sponsored project. The Murkowski administration worked hardest on this. Over three years negotiators hammered out key terms – a state equity ownership, gas taxes locked in for 35 years after pipeline startup, much higher oil taxes now but a lockdown on further oil-tax changes for 30 years.
The new governor elected that November, Sarah Palin, was about to usher Alaska’s gas pipeline efforts down a new path.
THE PALIN PLAN
- North Slope gas would be made available for Alaska use, though someone other than the project developer would need to move the gas from the big pipeline to consumers.
- Certain actions to hold down the pipeline tariffs to encourage North Slope exploration and development.
- Agreement to hire Alaskans and Alaska companies.
- A firm timeline for project development, though no commitment to build the pipeline.
- Agreement to expand the pipeline to accommodate future shippers, with all shippers contributing to the expansion cost.
- And the biggie: A commitment to continue engineering and other work toward getting federal approval of a pipeline even if shippers fail to pledge enough gas during the initial open season to make the project viable. The state believed shippers eventually would sign up, and getting a federal certificate for a pipeline would keep the project moving forward while negotiations with shippers progressed.
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March 14, 2012
During the Yukon Pacific era, their optimism pushed aside the idea’s Himalayan-sized market challenges and clung to a hope that a successful LNG project could offer Alaska a powerful and lasting economic kick.
WORLD’S LARGEST LNG PLANT
- The pipeline would go from Prudhoe Bay to Nikiski on the Kenai Peninsula southwest of Anchorage, not to Gravina Point near Cordova. Nikiski already was home to a 14-year-old LNG export plant, the only one in the United States, but the new plant would be about 10 times larger. Within a few years, the proposal’s terminus shifted eastward to Valdez, so the gas pipeline would run parallel to the trans-Alaska oil pipeline from Prudhoe Bay to tidewater.
- The pipeline could carry the full stream of Prudhoe Bay gas, not just methane but also such gas liquids as propane and butane as well as some unusual ingredients – carbon dioxide and other contaminants usually removed from pipeline gas.
Yukon Pacific at-a-glance |
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Project: Pipeline from Prudhoe Bay south to liquefied natural gas plant at Valdez, Alaska. LNG shipped by tanker to Asia. |
Sponsors: CSX Corp. became majority owner. Other investors included Wally Hickel and Supra Corp. |
Capacity: 2.3 billion cubic feet a day |
Length: 797-mile Alaska pipeline |
Cost estimate (1996): $18 billion |
Source: U.S. Department of Energy; Yukon Pacific |
But Yukon Pacific proposed to pipe the contaminants and extract them at Nikiski, where the plant would be cheaper to build. Of course, that would leave unresolved the chore of carbon dioxide disposal. Yukon Pacific had some ideas about that: Sell it to petrochemical plants as feedstock, spike it with other hydrocarbons to produce low-grade fuel, shoot it into nearby Cook Inlet oil fields to scrub out more crude, or vent the gas into the atmosphere “in tall stacks.”
PAPERWORK IN ORDER
Alaska gas pipeline 1982-2001 |
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1982 – Proposed Alaskan Northwest project along Alaska Highway into Canada postponed. Two former Alaska governors, Wally Hickel and Bill Egan, head state task force to find a pipeline solution. |
1983 – Task force recommends 800-mile pipeline to Alaska’s Pacific Coast, with LNG exports to West Coast or Asia. Hickel forms Yukon Pacific Corp. to develop this project. |
1986 – Lower 48 transportation giant CSX invests in Yukon Pacific. |
1988 – CSX becomes majority owner of Yukon Pacific. |
1988-1989 – Yukon Pacific obtains right of way across federal land and federal export authorization. Target market is Asia. |
Early 1990s – Yukon Pacific says it has tentative deals with LNG buyers in South Korea and Taiwan but never achieves final contracts. |
1990s – LNG prices remain low, averaging $3.52 per million Btu during decade in Japan, too low to make project profitable. |
2001 – As three major North Slope producers look into their own pipeline project to Lower 48, Yukon Pacific slashes staff. |
Between 2008 and 2011, Yukon Pacific loses bid to extend conditional right of way across state land, fails to get federal authorization extended for its Valdez LNG plant, and gives up federal-land right of way. |
But paperwork got the company only so far. It never had gas for its pipeline to carry.
ELEPHANT IN A DOG HOUSE
But the Asian LNG price was linked to oil, not inflation. And oil prices were falling. In 1988, the average price in Japan was $3.34, according to the 2011 BP Statistical Review of World Energy. The price didn’t get much higher for a long time. From 1987 through 1999, the LNG price in Japan averaged $3.47. Other LNG projects in Asia could hit that price and make money. With LNG sold under decades-long contracts, the price risk for buyers was too great and Yukon Pacific’s project couldn’t complete.
YUKON PACIFIC DREAM FADES
Bill White
March 13, 2012
Still, the 1970s fight over Alaska’s natural gas bounty set the table for what came next as various parties continued to push differing gas pipeline projects forward. The themes that crystallized by the mid-1970s stayed hardened over the ensuing decades: A national preference for piping gas to the Lower 48, an Alaska tilt toward an LNG project, North Slope producers running hot and cold on a pipeline project of any kind and a world appetite for natural gas that just kept growing without Alaska gas.
CANADA: THE FIRST MOVER
Arctic Gas at-a-glance |
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Project: Pipeline from Prudhoe Bay east to Mackenzie Delta in Canada, then south through Canada to U.S. Midwest and West |
Sponsors: Consortium of U.S. and Canada pipeline companies and Arctic oil and gas companies |
Capacity: 4.5 billion cubic feet a day, half from Alaska, half from Canada |
Length (1976): 4,512 miles |
Cost estimate (1975): $6.7 billion |
Source: Federal Power Commission |
But an upstart competitor was loading its cannons and bracing for a battle.
A NEW IDEA – LNG TO CALIFORNIA
El Paso |
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Project: Pipeline from Prudhoe Bay south to liquefied natural gas plant at Gravina Point near Cordova, Alaska. LNG shipped by tanker to California. |
Sponsors: El Paso Natural Gas Co. for pipeline, LNG plant and tankers. Western LNG Terminal Co. for California regasification plant. |
Capacity: 2.4 or 3.1 billion cubic feet a day |
Length (1976): 810 miles of Alaska pipeline, 2,200-mile tanker route, 250 miles of California pipelines |
Cost estimate (1975): $6.6 billion |
Source: Federal Power Commission |
“The time is long gone when Alaskans have to fall over and play dead to a bunch of Texas oilmen.”
THE BATTLEGROUND
Then, in mid-fight, 15 months after Litt started his hearing, a new event exploded on the proceedings like a hand grenade.
THE ENTREPRENEUR FROM UTAH
Alaskan Northwest at-a-glance |
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Project: Pipeline from Prudhoe Bay south to Interior Alaska, then into Canada along the Alaska Highway for delivery to U.S. Midwest and West |
Sponsors: Consortium headed by Northwest Energy Corp. (U.S.) and Foothills Pipe Lines Ltd. (Canada) |
Capacity: 2.4 billion cubic feet a day |
Length (1976): 4,787 miles |
Cost estimate (1975): $6.8 billion |
Source: Federal Power Commission |
Something needed to be done to break the stalemate developing in Litt’s hearing room.
POLITICIANS AND ENVIRONMENTALISTS
Alaska gas pipeline 1968-1982 |
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1968 – Gigantic oil and gas discovery at Prudhoe Bay announced. |
1969-1970 – Smaller oil and gas discoveries announced at Mackenzie River Delta in Canada’s Arctic. |
1971 – Canada-based consortium studies feasibility of pipeline linking Prudhoe and Mackenzie gas fields to Lower 48. |
March 1974 – Arctic Gas applies to U.S. Federal Power Commission and Canada’s National Energy Board for permission to construct. |
September 1974 – El Paso applies to FPC to pipe gas south to Alaska’s Pacific Coast, where gas would be liquefied for transport via tankers to California. |
May 1975 – FPC Administrative Law Judge Nahum Litt begins hearing on which project to authorize. Hearing concludes in late 1976, after Congress intervenes. |
June 1976 – Alaska Natural Gas Transportation Act introduced in Congress, proposing FPC change its role from deciding route to recommending one to president, who would decide. |
July 1976 – Alcan Pipeline Co. (later called Alaskan Northwest) files third application with FPC for a gas pipeline. Route would run south ot Interior Alaska then follow Alaska Highway into Canada. |
October 1976 – Congress passes ANGTA, which sets deadlines: May 1977 for FPC to make its recommendation, September 1977 for president to decide, November 1977 for Congress to approve or reject president’s decision. |
February 1977 – Judge Litt recommends FPC select Arctic Gas project. |
May 1977 – FPC commissioners deadlock in recommendation to President Carter: Two favor Arctic Gas; two favor Alaskan Northwest. |
July 1977 – Canada’s NEB calls Arctic Gas project environmentally unacceptable. U.S. and Canada negotiate terms of moving Alaska gas through Canada. |
September 1977 – President and Canada agree on Alaskan Northwest route. |
November 1977 – Congress sanctions Carter’s choice of Alaskan Northwest. |
April 1982 – Unable to find financing, Alaskan Northwest postpones construction of Alaska and northern Canada legs of project. |
Early 1980s – Lower one-third of pipeline system, from southern Canada to Lower 48, gets built. |
But as the fight raged on Capitol Hill and Judge Litt’s hearing plodded ahead, the White House made a jaw-dropping suggestion that broke both impasses.
A GAME-CHANGING IDEA
The bill blitzed through Congress. Ford signed the Alaska Natural Gas Transportation Act [9] into law in October 1976. But he would not get to choose the winning pipeline route. Eleven days after signing ANGTA, Ford lost the election. The choice would fall to the new president, Jimmy Carter.
LITT, FPC WEIGH IN
As for ANWR, the commissioners echoed Litt in writing: “We believe it is possible to approve a buried pipeline through the Range without setting in motion an inevitable progressive violation of the Range.”
U.S. AND CANADA SHAKE HANDS
Between the two countries, the entire pipeline network would encompass 4,787 miles, with an average daily flow from Prudhoe Bay of 2.4 bcf.
THE DEMISE STARTS QUICKLY
“The Alaska Highway gas pipeline almost certainly offers substantial net economic benefits to both the United States and the State of Alaska, but as a business venture it may be marginal at best without extraordinary kinds of government intervention,” they wrote in another 1979 report.
THE BRIGHT SIDE OF NO PIPELINE